ROE v. Paid: Banks Are Where the Money Is
If you ever needed proof that it pays to go into finance, here it is.
Of the 80 financial-services companies in the
S&P 500
, 31 of them handed their chief executives eight-figure checks. The nice thing about being a financial-services CEO is, you don't always have to earn it: As today's
ROE v. Paid: Financial Services
chart shows, only 41 -- just over half -- of the financial-services outfits in the S&P 500 managed to post return on equity of 15% a year on average over the past five years. And so it goes: Pay doesn't always correlate with performance.
As part of
TheStreet.com's
coverage of executive pay, the ROE v. Paid charts compare a company's average return on equity -- or ROE, a handy measure of how effectively a CEO puts shareholder money to use -- over the past five years with the chief executive's compensation. For compensation, we used the most recent figures provided by Aon Consulting's eComp Database -- the numbers include salary, bonus and options.
Lots of media outlets have been measuring executive pay against the company's stock market returns over the past year. Since the S&P 500 cratered 23.4% in 2002, and took down lots of individual companies with it, we felt ROE would be a fairer -- if still imperfect -- measure of executive performance. (For more on our series, please read
this column.)
According to the chart, some high-profile finance chieftains haven't exactly been knocking the cover off the ball on ROE. While the verdict is still out on whether Jamie Dimon's three-year effort to turn around
Bank One
(ONE) - Get Report
will bear fruit, his $10.7 million compensation last year -- compared with a five-year average ROE of 11.9% -- shows he gets paid as if it were a done deal. (Dimon also has $21.2 million in unexercised stock options from previous years, according to eComp.)
To be fair, Dimon's payday is modest compared to peers. Consider
J.P. Morgan Chase
(JPM) - Get Report
, where William Harrison took home $21.9 million in pay, bonus and options in 2002, while the firm's five-year ROE is a less-than-stellar 11.9%. The stock, for what it's worth, skidded 34% last year.
For the stock-watchers out there, the ROE v. Paid chart also shows market returns for 2002: Only 22 of the 80 financial-services outfits ended in the black. As the chart indicates, that hasn't put CEOs out too much. And before you start taking up a collection for executives such as
Capital One's
(COF) - Get Report
Richard Fairbank, whose compensation totaled a mere $97,274 last year, consider: Fairbank has $103.9 million in unexercised options from previous years, according to eComp.
Check today's chart to see how the rest of the financial-services CEOs stack up.